Labour migration: Ukraine is losing people and future

Author : Ivan Zatsarin

11:46, 4 November 2015

Labour migration: Ukraine is losing people and future

Author : Ivan Zatsarin

Branches of transnational corporations and valuable employees leave Ukraine

11:46, 4 November 2015

According to the rating published by Credit Suisse bank, Ukraine considered as the poorest country. Suddenly it turned out that even Moldova, the poorest European country as it has been considered, is at least twice richer than Ukraine (by GDP per capita).

Who, where, why?

Ukrainian proverb states on this regard, "Poor – because stupid, and stupid – because poor." But this is to general, nonobjective characteristic. Reasons for our poverty include low wages and high level of unemployment.

Ukrainians have been departuring to work abroad always, under the tsarist regime, then in the Soviet epoch. This continued during the era of independence, when Ukraine entered the top five countries with the highest percentage of labour emigration (13%). However, the most disturbing is not this, but the sharp increase in the number of Ukrainians working abroad illegally. Their number has grown since 2011 from 28% to 40%. What does it mean?

At least the fact that the economic situation is deteriorating rapidly, forcing the Ukrainians to literally flee to neighboring countries in search of work. And that is performed quickly, rarely with accordance to the law.

Data on the total number of migrants vary. According to Ukrainian Ministry of Labour, there are approximately 3-5 million. Unofficially experts state about up to 9 million labour migrants from Ukraine. In the opinion of most researchers, every third Ukrainian works abroad (6.5-7 million). And a certain share of these millions already are not actually labour migrants. They went to Italy, Poland, Russia a few years ago, gradually took out their families, and will not come back to their homeland. May be, just as tourists, in order to visit the graves of relatives.

Migration flows from Ukraine after rapidly intensified the Euromaidan. In Poland alone, the right to permanent or temporary residence in 2014 received 247 thousand Ukrainians - 60% more than the year before. On average across the EU countries, this figure rose to 30%. However, cash remittances from migrants to their homeland gradually decrease.

How does it work in practice?

The most easy it is for property owners, which can lease it or sell. That's how a few years ago did Larisa, landlady of one of my friends. She found agents who agreed to hand over to her apartment for a small percentage, sending her the money in euros. Then she looked for a job in Germany (teacher at the local vocational school). However, drop of hryvnia rates in 2014 and especially in 2015 significantly reduced her Ukrainian part of the revenue, but by the time she managed to get a slight increase, and even get married. Naturally, she does not plan to return.

Of course, not all are so lucky. Lack of savings and families force migrants to take any available job. That's what happened to do my classmate Dmytro. Zaporizhia even before the Euromaidan was the depressed city - youth ran out in search of work in Donbas, Dnipropetrovsk, Kharkiv, Kyiv. But in the summer of 2014 it became absolutely unbearable. Otherwise, people with two higher education and homeownership would not go to work to the oil extraction plant in Poland. The work is not easy, especially for a man who learned to earn with his head, not the hands. But you need to know despair of Zaporizhia youth: it is not easy to find a job even with $200 salary.

The number of such "Dmytros" will only grow. According to the survey of GFK Ukraine, conducted at the request of the International Organization for Migration, about 3 million Ukrainians plan to go to work abroad in the nearest future. One out of five of them is ready to cross the border illegally to work under lock and key, or to give an employer it’s passport - if it allows them to find a job.

But the picture of the Ukrainian labor migration is still not full.

Outsourcing - to the sidelines

In recent years, Ukraine rapidly developed markets of outsource programming (creation of software products for external customers). In 2014, Ukraine has entered the 1st place in Eastern Europe in the number of executed orders: according to the top$dev portal, Ukrainians performed 33% of all such work. According to the results of 2013, the volume of this market was estimated at $2 billion, in 2014 - $2.4 billion, and for 5-7 years, this figure could increase fourfold. Could. If it does not fall.

The relatively new trend in this market is flight of outsource developers from Ukraine. Due to the unfriendly actions of the Ukrainian authorities, the companies escape their offices abroad: for many of them it's easy to do, because they were originally created as joint ventures, or else they have branches in several countries.

In mid-October it became known that the Hewlett-Packard partly moves its Kyiv office in Warsaw - the unit that is engaged in the development of personal systems and PCs.

Just after this the media reported that half of the staff of the Odesa office of the Norwegian company Opera was moved to Ireland. The office was responsible for Opera Mobile Store application.

October became truly a black month for Ukrainian IT companies. Dnipropetrovsk company 908 did not waste time on trifles, and took out the whole office to Wroclaw, Poland. Asked about the reasons for this decision, co-founder of the company A. Horsey answered: "This country is f*cked up."

But this flight did not begin this year. In May 2014, the largest developer - Luxsoft company - announced that 500 of its employees will be transferred to Bulgaria. Cogniance moved the half of its Kyiv office to Warsaw - preferring not to attract the attention of the media.

Oleh, the friend of mine, is one of the staff of Cogniance. He asked not to cover in this article the reasons of such a step. But in fact he agreed to talk about the move.

Cogniance is the international company with a branch in Poland. Therefore, the move did not have any problems. Ukrainian workers were simply sat to the Warsaw office, preparing them to a separate wing.

The salary of transferred employees is higher than that of their colleagues in Kyiv. But because of the difference in taxation in Poland and Ukraine, need to buy insurance, the impossibility of "gray" employment and so on, the net salary is lower. But it did not scare the applicants, on the contrary, they had to fight for a place in the Warsaw office. As result, the best have left. According to Oleh, within a few years, Kyiv division may be closed at all, moving projects and customer service to the Polish office.

However, the question is still open and depends largely on the government and its willingness to stop scaring IT crews. But they do not just go to work - the programmer can work anywhere in the world, he don’t even have to attend the office. With the departure of each employee of the IT-sphere, Ukraine is losing jobs, to which the government do not need to invest. Not to mention the fact that the loss of each such employee means loss of $12 thousand (at least) of foreign currency inflow in a year, which was spent on the domestic market.

The process, as we see, is self-sustaining. Ukrainians go to work, the domestic market is reduced, employers are cutting staff, who also is leaving, etc. The increase in tax revenues, reported by government, is provided by inflation rather than taxes from wages and company profits. What to do? That's right, it is necessary to impose a tax of migrant workers! The corresponding bill was taken into consideration by the Verkhovna Rada at the beginning of October. I wonder how many will return to pay these taxes?

Ukraine is a truly great and rich country if it can afford squandering people in such scale.

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